Basilea - Going for growth

We published a research note on Basilea this morning, updating our outlook and model.

Over the last three years, the Basilea team has successfully transformed a loss-making development group into a highly profitable, focused anti-infectives company, boasting a strong balance sheet. This important transition appears to have been overlooked by many, we believe, as the valuation (a PE ratio of approximately 10x 2025 earnings) fails to adequately reflect Basilea's growth prospects and valuable pipeline. Additionally, Basilea has secured a significant proportion of its R&D requirement from non-dilutive sources.  The recent $280m funding awards from BARDA and CARB-X highlight the importance of Basilea’s pipeline from a public health perspective.

Many healthcare investors have chosen to avoid anti-infectives, particularly development companies, as the nature of antibiotic use has led to a belief that companies would struggle to generate adequate returns on investment.  Basilea has disproven this theory with its lead product, Cresemba, an antifungal to treat life-threatening infections, delivering sales of over $560m in 2024 and continuing to grow ahead of expectations.

The success of Cresemba has been partly driven by the team’s ability to sign relevant partners globally, such as Pfizer, Astellas, Asahi Kasei and Hikma, which bodes well for future partnerships for its existing development assets. Admittedly, the downside of Cresemba’s success is the concern about its 2027 loss of marketing exclusivity in Europe and the US.  However, recent launches of Cresemba in China and Japan, where sales are growing rapidly, should help offset declines in these other markets.  Additionally, Basilea recently gained approval for its antibacterial Zevtera in the US for bloodstream and serious skin infections, which we believe will generate peak sales of almost $400m in the US alone. Zevtera is set to launch in the US in the middle of 2025 through partner Innovivo Specialty Therapeutics and should help to support any Cresemba declines in 2028.

Looking at Basilea’s pipeline, antifungal fosmanogepix has the potential to be a blockbuster, and we expect peak sales of $1.2bn. It’s currently in Phase 3 trials. Fosmanogepix, along with other pipeline assets, was recently awarded non-dilutive funding of up to $268m from BARDA, which is expected to cover approximately 60% of Basilea’s total development costs. This means Basilea is set to remain a significantly profitable and cash-generative company through the launch of fosmanogepix and beyond.  This profitability and reduced funding risk make Basilea a compelling investment for generalists, as well as specialist healthcare funds. 

We have a DCF-derived fair value of CHF120 per share, compared to the current share price of CHF43.

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Calvine Partners LLP is authorised and regulated by the Financial Conduct Authority.

Basilea Pharmaceutica is a client of Calvine Partners, and as such, this publication is not independent and should be considered a marketing communication under FCA Rules. None of the information in this publication should be considered as any form of advice.

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